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Issue 39926

Schedule 8812 and Instructions

Project Statement: Evaluate the Form and Instructions for the Schedule 8812 (Form 1040) Additional Child Tax Credit. Determine if the form and instructions clearly communicate the appropriate guidance to public.

Goal Statement: The goal of this project is to review and make recommendations to the IRS that will enhance customer service and improve the taxpayers’ experience.

TAP RECOMMENDATION

ID 1566 General Instructions

Caution – If you file Form 2555 or Form 2555-EZ, Foreign Earned Income Exclusion, you cannot claim the ACTC. Identification of the form name immediately following referenced form numbers assists the taxpayer in recognizing which form is being discussed. This cuts down on the time-consuming task of looking up the form to see if it applies. Most taxpayers do not have all forms numbers memorized.

IRS Action:Not adopted

ID 1566 General Instructions

We will not adopt this suggestion. The TF&P style guide discourages the inclusion of full titles in our instructions. Also, it is reasonable to assume that a taxpayer who files Form 2555 is aware of its purpose.

TAP RECOMMENDATION

ID 1567  Revise as follows: You also cannot use a qualifying child without the required SSN to claim the child tax credit on either your original or amended 2018 return. However, a qualifying child who does not have the required SSN may be used to claim the credit for other dependents instead. See your tax return instructions See Form 1040, or 1040 NR Instructions for more information about claiming the credit for other dependents Provides clarify to taxpayer.

IRS Action:Not adopted

ID 1567 We will not adopt this suggestion.

We do not want to confuse taxpayers by directing them to any instructions, we want taxpayers to use the instructions that are specific to their situation.

TAP RECOMMENDATION

ID 1568 Revised to read as follows: Page 1, Column 3, 1st Paragraph

For tax years 2018-2025, qualifying children must have a Social Security number (SSN) by the due date of your return. If your qualifying child does not have an SSN or IRS individual taxpayer identification number (ITIN) issued on or before the due date of your 2018 return (including extensions), you cannot claim the ACTC on either your original or an amended 2018 return.

Remove red bolded text, as it is not correct. The Additional child tax credit and the Child Tax Credit cannot be claimed by a taxpayer with a dependent that has an ITIN. Leaving this text in the instructions will cause confusion. See also IRM 21.6.3.4.1.24(1)

IRS Action:Not adopted

ID 1568 We will not adopt this suggestion.

The “current text” falls under the heading “You must have a taxpayer identification number by the due date of your return.” A taxpayer can claim the ACTC if the taxpayer has been issued an ITIN on or before the due date of their return. The requirement for an SSN only applies to the taxpayer’s qualifying child (see IRC 24 (e)(1), (h)(7)).

TAP RECOMMENDATION

ID 1569 Delete this paragraph: Page 1, Column 3, 2nd Paragraph

If you apply for an ITIN on or before the due date of your 2018 return (including extensions) and the IRS issues you an ITIN as a result of the application, the IRS will consider your ITIN as issued on or before the due date of your return

This paragraph should be deleted as it speaks about ITINs which are not allowed to be used when claiming the Additional Child Tax Credit of the Child Tax Credit for tax years 2018-2025. Leaving this paragraph in the instructions will only cause confusion with taxpayers, as it implies a dependent with an ITIN can qualify to obtain the Additional Child Tax Credit and that is not correct under the PATH Act. This paragraph belongs in the instructions for the Form W7 or on Form 1040, not here.

IRS Action:Not adopted

ID 1569 We will not adopt this suggestion.

The “cited text” is under the heading “You must have a taxpayer identification number by the due date of your return.” A taxpayer can claim the ACTC if they have been issued an ITIN on or before the due date of their return. A taxpayer’s qualifying child cannot be used to claim the ACTC if the child has an ITIN (see IRC 24 (e)(1), (h)(7)).

TAP RECOMMENDATION

ID 1570 Draft 8812 Instructions, Page 2 Nontaxable combat zone compensation pay (see separate instructions) ………..

Line 6b Nontaxable Combat Zone Compensation Pay. Enter on line 6b the total amount of nontaxable combat zone compensation pay that you, and your spouse if filing jointly, received in 2018. This amount should be shown in Form W-2, box 12, with code Q. The term “Combat Pay” has not been operative for military pay purposes for more than 60 years and ceased to be applicable for federal tax purposes more than 20 years ago. It should be changed to reflect federal tax current law.

Combat pay was last payable to members of the armed forces during the Korean War. See Military Compensation Background Papers, Seventh Edition (2011), published by the Department of Defense. http://www.loc.gov/rr/frd/pdf-files/Military_Comp-2011.pdf

Although the exclusion for compensation received by members of the armed forces for service in a combat for the Korean War was enacted as part of the Revenue Act of 1950 (P.L. No. 213) as an amendment Section 22(13) of the Revenue Code of 1939, when codified as section 112 of the Internal Revenue Code of 1954, the section was entitled “Certain Combat Pay of Members of the Armed Forces.” (68A Stat. 34). See also Patrick J. Kusiak, Income Tax Exclusion for Military Personnel During War, 39 FED. B. NEWS & J. 146 (Feb. 1992).

In 1996, the title for IRC sec. 112 was amended by substituting “combat zone compensation” for “combat pay”. P.L. 104-188, sec. 1704(t)(4)(A) (1996), 110 Sta. 1887.

Recommendations to revise IRS Pub. 3, Armed Forces Tax Guide, have been approved by the TAP Joint Committee for formal submission to the IRS.

IRS Action:Not adopted

ID 1570 We will not adopt this suggestion.

Our source for the phrase “nontaxable combat pay” is the Form W-2. In order to avoid confusion, we will continue to use “nontaxable combat pay” until the originators of the Form W-2 change their phrasing.

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2020 TAP Annual Report

The 2020 TAP Annual Report highlights our key recommendations to improve IRS customer service and summarizes our key accomplishments and activities, including the 237 recommendations submitted to the IRS in 2020.

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